Mr Cameron said he hoped to persuade members of the G8 group to sign a pledge agreeing to ban ransoms in a bit to cut off a significant source of terrorist funding.

Britain has a policy of refusing to pay for the release of kidnap victims, but some other countries have been willing to do so.

In the past, France, Italy and Japan have reportedly made payments to secure the release of their nationals.

Nearly £40 million worth of payments have been handed over in the past five years, much of it believed to have ended up funding terror groups including al Qaida and the Taliban.

Speaking at a G8 conference in London on Thursday, Mr Cameron said: "On some of the issues on the G8 agenda - for instance trying to make sure that we stop countries paying ransoms to terrorist kidnappers - I want a declaration. I want countries to sign up to a tangible agreement."

Islamist terrorist groups have kidnapped more than 150 foreign nationals since 2008, including 13 Britons, according to the UK's Office of Security and Counter-Terrorism.

"In many cases ransoms have been paid, and we conservatively estimate that AQ affiliates and other extremist groups have collected at least $60 million (£36million) in foreign national ransom payments since 2008," said the report.

It warned that kidnapping for ransom was becoming "an increasingly common terrorist tactic" raising "a very significant amount of revenue" for al Qaida and other extremist groups. Almost 50 people were abducted by kidnappers in 2012 - double the level of two years previously.

Downing Street said Mr Cameron decided to put counter-terrorism at the heart of the G8 agenda following the Algerian hostage crisis in January, when six Britons were killed and many more held captive after militants stormed a desert gas facility.

The proposed block on ransoms is one of a number of areas where the Prime Minister believes greater international co-operation is possible, which will be discussed at the G8.

A No 10 spokeswoman said: "We believe that there are common threats and G8 leaders can come together to find ways of helping prevent those and respond to incidents when they happen. This issue of ransoms is one we are looking at."

Negotiations are understood to be going on ahead of the Lough Erne gathering in Northern Ireland, but the spokeswoman declined to discuss whether any of the G8 states were resisting the call to stop ransom payments.